July 19 (Bloomberg) -- Nexen Inc., the Canadian oil
producer that’s been seeking a new chief executive officer for
six months, said profit fell 57 percent because of lower crude
prices and its unsuccessful Kakuna well in the Gulf of Mexico.

Second-quarter net income fell to C$109 million ($108
million), or 19 cents a share, from C$252 million, or 45 cents,
a year earlier, the Calgary-based company said in a statement
today. Per-share profit was less than the 31-cent average of 10
analysts’ estimates compiled by Bloomberg.

Nexen has had setbacks at its Long Lake oil sands and North
Sea operations, which held back earnings growth. Bitumen
production in Alberta as well as offshore crude output at the
Usan project in Nigeria is growing slower than the company
expected, interim Chief Executive Officer Kevin Reinhart said.

“Global oil prices were lower than the first quarter but
our weighting to Brent continues to benefit us compared to peers
who have production linked to either WTI or further discounted
Canadian benchmark crudes,” Reinhart said during a conference
call with analysts today. The company aims to boost production
at Usan as it develops more wells, he said.

Prices for West Texas Intermediate, the U.S. benchmark for
crude, averaged $93.35 a barrel in the second quarter, down 8.8
percent from $102.34 in the year-earlier period. Brent, the
European benchmark oil, fell 7 percent to $108.76 in the same
period.

Cash flow from operations in the quarter rose to C$707
million from C$598 million a year earlier, and net debt
increased to C$3.14 billion from C$2.84 billion. Sales increased
10 percent to C$1.66 billion.

Buzzard Performance

Production after royalties averaged 207,000 barrels a day,
compared with 180,000 barrels a year earlier. The increase was
driven by increasing production at its Usan field off the coast
of West Africa and a “good performance” from the Buzzard field
in the North Sea.

“Production was slightly ahead of our estimate,” Michael
Dunn, an analyst at FirstEnergy Capital Corp., said in a note to
investors.

Former CEO Marvin Romanow stepped down in January amid a
slumping share price and missed production targets. The board is
looking for a permanent replacement.

Nexen expects to get about 70 percent of its production
from offshore reserves including the North Sea, West Africa and
the Gulf of Mexico this year, according to its website. The
company also has a 7.2 percent stake in Syncrude Canada Ltd. and
a joint venture with Cnooc Ltd. to produce bitumen in Alberta.

The company boosted output from its Long Lake oil-sands
project in the second quarter. It began producing at Usan in the
first quarter. The Usan wells can “do better” than they are
now, said Reinhart.

Abandoned Well

Nexen abandoned drilling operations on the Kakuna
exploration well in the Gulf of Mexico in May after failing to
encounter enough hydrocarbons to make production profitable. The
company spent C$120 million to drill the 30,300-foot (9,235-meter) well, it said May 7.

Nexen increased 1 cent to C$17.44 at the close in Toronto.
The stock, which has gained 7.6 percent this year, has 15 buy
and nine hold ratings from analysts.